Correlation Between Hitachi Construction and CubicFarm Systems
Can any of the company-specific risk be diversified away by investing in both Hitachi Construction and CubicFarm Systems at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hitachi Construction and CubicFarm Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hitachi Construction Machinery and CubicFarm Systems Corp, you can compare the effects of market volatilities on Hitachi Construction and CubicFarm Systems and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hitachi Construction with a short position of CubicFarm Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi Construction and CubicFarm Systems.
Diversification Opportunities for Hitachi Construction and CubicFarm Systems
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hitachi and CubicFarm is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and CubicFarm Systems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubicFarm Systems Corp and Hitachi Construction is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hitachi Construction Machinery are associated (or correlated) with CubicFarm Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CubicFarm Systems Corp has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and CubicFarm Systems go up and down completely randomly.
Pair Corralation between Hitachi Construction and CubicFarm Systems
Assuming the 90 days horizon Hitachi Construction is expected to generate 55.06 times less return on investment than CubicFarm Systems. But when comparing it to its historical volatility, Hitachi Construction Machinery is 27.13 times less risky than CubicFarm Systems. It trades about 0.11 of its potential returns per unit of risk. CubicFarm Systems Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 7.00 in CubicFarm Systems Corp on December 5, 2024 and sell it today you would earn a total of 18.00 from holding CubicFarm Systems Corp or generate 257.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 96.61% |
Values | Daily Returns |
Hitachi Construction Machinery vs. CubicFarm Systems Corp
Performance |
Timeline |
Hitachi Construction |
CubicFarm Systems Corp |
Hitachi Construction and CubicFarm Systems Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hitachi Construction and CubicFarm Systems
The main advantage of trading using opposite Hitachi Construction and CubicFarm Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi Construction position performs unexpectedly, CubicFarm Systems can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CubicFarm Systems will offset losses from the drop in CubicFarm Systems' long position.Hitachi Construction vs. Terex | Hitachi Construction vs. Komatsu | Hitachi Construction vs. Astec Industries | Hitachi Construction vs. Komatsu |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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